Interns and trainees: Paid or unpaid?

By Rose Miller

Published 3:50 pm, Monday, August 4, 2014

College students may be finishing up their summer internships, but a whole new group of interns is gearing up to head into offices this fall. Internships afford students the opportunity to gain practical, real-world experience as well as explore career paths and develop contacts.

Do employers understand the legal issues surrounding the use of interns and do the interns know the rules?

Many do not.

Interns aren't volunteers, and they must be compensated either financially or by receiving college credit.

Makes sense, right?

Unfortunately, there seems to be a lot of misconceptions about paid and unpaid internships.

The Fair Labor Standard Act (FLSA) doesn't include the definition of "intern" and there isn't a specific exemption from minimum wage or overtime. The FLSA does acknowledge not everyone who performs duties for the company is an "employee." Similar to the 20-point test that outlines criteria for independent contractors, the FLSA provides a much shorter test to help employers determine whether the intern performs duties as an employee, and therefore is entitled to compensation in accordance with wage and hour laws. Basically, if the intern does work like an employee, most likely the intern should be paid.

To further complicate matters, many interns are willing to accept an unpaid internship without question, because they're eager to gain work experience. We see many interns who tell us they have previously worked unpaid internships — and they also did not receive course credit. However, when they describe the work they performed, it sure sounds a lot like the work that would otherwise be done by an employee.

Many college placement counselors also don't understand the rules. We have received calls from counselors saying they have students available for unpaid internships.

So what does a student do when they're told there is an internship available, but it doesn't include a paycheck?

A good answer may be, "My advisors tell me unless I receive college credit or the internship is instructional, most internships should be paid. At least minimum wage. The last internship I had with similar duties was paid."

Employers need to understand how dangerous it is to not pay a student. All you have to do is look on Craigslist, a common place to post jobs, to find unpaid internships that lists duties the same as an employee. Employers need to know the Department of Labor is reviewing these posts too. Last year, famous designer Norma Komali's firm paid a large sum in back wages and penalties in a case involving not paying its interns.

Free labor may sound attractive, but unpaid internships cannot be a way for a company to supplement their workforce. If you think of the saying, "If it sounds too good to be true ..." you're probably spot on. The employer can get busted for exploiting what is considered the lowest wage earners in the country.

How's that for headlines?

Properly structured unpaid internships should focus on exposing the intern to a particular career field and offer a mentoring experience. In certain circumstances, companies may be able to offer an unpaid internship if the intern is just observing or learning the job (essentially, job shadowing), and not actually doing work that benefits the company.

If the intern benefits primarily from the arrangement, he or she may be legally be considered a volunteer or trainee rather than an employee. If an employer chooses to offer unpaid internships, it should take care to structure the position in such a way to ensure that the intern is the one who will receive the primary benefit of the work experience. Otherwise, the student cannot waive his or her rights to receive pay.

And whether paid or unpaid, they need to be offered the same rights and protections of any other employee. New York State just amended the Human Rights Law to protect unpaid interns. This was the result of case where an unpaid intern was sexually harassed. The female intern was groped by her supervisor and filed a complaint. The employer dismissed the claim because the intern was not a paid employee.

Internships can be a great experience for both interns and the company. The company gains access to potential employees and the interns gain valuable experiences. However, the company has the responsibility of complying with wage and hour laws. The intern should be afforded the same rights as any other employee.